Would Warren Buffett Buy Airline Stocks?

One of the most uncharacteristic stock purchases in Warren Buffett's storied history was his acquisition of JetBlue Airlines shares in the late 1980s. Buffett sold his shares in JetBlue Airlines several years later, vowing to never again invest in airline stocks. The airline industry is the only sector of the economy that, as a whole, has lost money over every rolling ten year period since 1965.

These are not places to make easy money. Airlines have to contend with fixed labor costs, fixed prices of seemingly ever increasing fuel charges, and very intense competition. The margins are slim, often wiped out by fuel charges or plans not carrying fuel capacity, and I don't think you'll be hearing stories of an airline sustaining and raising a dividend for a half century, like we have seen from some of the best companies on the Dividend Aristocrat Index. The only blessing in the industry is the relatively high barrier to entry, but given its awful track record, and given the fact that oil costs can offset any profits, I don't see any long-term wealth creation in the airline industry. When you could purchase a company like Johnson & Johnson, which has billions of dollars in profits from over 1,000 different sources, and has been steadily increasing its dividend for 50+ years, how could you justify buying an airline stock? I just don't see it. Mark at Buy Like Buffett points to some of the difficulties in the airline industry, and I recommend that you check out his great thoughts on the subject by clicking here: http://buylikebuffett.com/buy-stocks-2/why-you-should-stay-away-from-airline-stocks/ .

How Much Money Does The Queen Make

Here's one of my favorite facts about the United States. Warren Buffett, who had a net worth of $10,000 in the late 1940s, is now worth over $50 billion dollars. The Queen of England, who possessed about $75 million dollars at the end of WWII, is now worth about $600 million. That generates about $24,000,000 in annual income for her to spend without touching the principal. Not bad. Of course, she also has special privileges, and could theoretically levy a tax on the British people to fund her existence should the need arise, a luxury that most of us probably don't have. The fact that Warren Buffett was able to start with nothing and accumulate a fortune over 100 times larger than that of the Queen of England, who had a lead of $75 million dollars at the mid-point of the century, is a great testament to the power of American capitalism. While there are certainly valid concerns about the capitalistic structure as it exists in the United States, we have a lot to be thankful for. The United States provides great social mobility to do those who can combine intelligence, patience, and a bit of wealth. If you can realize how important compounding money is, you can be well on your way to making riches. Check out this great article at Million Dollar Journey to read more about the affluence of The Queen: http://www.milliondollarjourney.com/how-much-does-the-queen-make.htm .

Warren Buffett's Charity Contributions and Lack of Inheritance for Children

Warren Buffett's Vice Chairman, Charlie Munger, once said, 'Of course I help out my children. I don't want too many people spitting on my grave, least of all my own children. If that means they're a little spoiled, then that's just too damn bad." One of the more interesting revelations about Warren Buffett's personal life is the fact that he has chosen to give 99% of his wealth to charity (The Bill and Melinda Gates Foundation), and he has not elected to give any substantial amount of money to his children. Is this wise? Who knows. While we all readily acknowledge that Mr. Buffett has the right to do with his money as he pleases, that doesn't mean we're not allowed to speculate on the wisdom of his decision by forming opinions about how we'd react in a similar situation. If your parents were loaded, would you be ticked off if they gave almost all of their wealth to charity? Would you make a couple fewer visits to their grave if they left you a modest sum in their will? If you had well-adjusted children, would you even consider leaving them out of your will? Jim Wang over at Bargaineering wrote a great piece on this topic, and be sure to check him out here: http://www.bargaineering.com/articles/10-million-bill-gates-children-inheritance.html .

Thoughts on How To Avoid Debt

You can't get ahead paying 18% interest to creditors. That's just a fact. Even if we pretend that it's 1960 and you invest some money with Warren Buffett's flagship Berkshire Hathaway, you're still not going to get ahead if you have to contend with minimum payments on debts compounding at 18%. Berkshire Hathaway, arguably the best investment you could have made in the past forty to fifty years, has only compounded at about 20%. So if you have high credit card debt, the odds that you'll get ahead are very slim. Without a doubt, the simplest solution is to avoid the debt in the first place. If you don't eat the ice cream, you won't have to lose weight. If you do find yourself in credit card debt, the first thing you have to do is stop increasing the debt, and from there, if you make double the minimum payments, you'll eventually dig yourself out of the hole. If you want to read a good article on avoiding debt in the first place, check out this gem from 'Not Made of Money,' link here: http://notmadeofmoney.com/blog/2011/07/five-ways-to-avoid-debt.html